One of the most valued and influential developments in the blockchain space is DeFi. This sector’s growth has been rather impressive with ingenious features and a stronghold on consumers’ interests. While decentralized finance has grasped a total value locked (TVL) of $15 billion earlier this year, there doesn’t seem to be a brake for DeFi’s constant success train.
While the current trends of DeFi are quite fascinating in themselves, it would be even more exciting to look at the future opportunities it holds, especially in 2021.
I’d like to take you through some of the potential for DeFi for this year and how much weight they carry.
Solving Scaling through DeFi apps
As of this moment, scalability is an issue for almost the majority of DApps’ users, which hasn’t had a global fix yet. This problem has single-handedly caused bottlenecks in the Ethereum network while also raising the fee for each transaction. Now, although the launch of Ethereum 2.0 is good news, there’s still a good while before we witness a full-scale release of it.
In the meantime, developers have already started to create fitting solutions, allowing better DApps to be available universally before the completion of Ethereum 2.0. One of the ways to do this has been to incorporate off-chain transactions. This technology can also possibly help Ethereum to withstand a 200-times increase in transactions. Quite the win-win situation for DeFi.
DAOs (Decentralized Autonomous Organizations)
Another crucial element of DeFi’s future relies on its financial systems, dependent upon DAOs. If true decentralized autonomous organizations are enforced correctly, they can further bring more transparency and security in transactions. This type of digital ledger will keep internet financial transfer records via blockchains and even reduce human intervention.
However, DOAs are not completely legit as any government or authority does not regulate them. Similarly, it has not much legal identity in the world as of yet. Nonetheless, if it does become a part of the legislation, DeFi’s following years are bound to skyrocket.
But then, does it need legal recognition? The way blockchain cord works, it is effectively law. There’s no changing what goes on in the blockchain!
NFTs (Non-Fungible Tokens)
One of the most exciting and well-known trends among crypto enthusiasts is NFTs. Non Fungible Tokens, by and large, are blockchain tokens that are indivisible. For the most part, they are backed up by a unique real-life or digital commodity. They’ve started gaining fame at quite a swift pace due to its merits, namely, possession of digital art, merchandise, and extra in-game items. The NFT markets allow people to buy/sell these products with cryptocurrencies.
This sect of the crypto world holds great value since it holds over hundreds of millions in sales.
Here’s where DeFi comes in!
There have been contracts set wherein users can use their digital commodities just like any other asset and have them monetized.
Few More opportunities
There are a few other aspects and projects that can be favorable to DeFi and its future. These are the release of special central banks that will provide digital currencies (CBDC).
The worldwide revolution of blockchain technology has caught the eyes of many central governments and banks. Being a step ahead, China has already begun working on this scheme and is also undergoing a trial process. This, in turn, displays how decentralized finance is being preferred over third parties, often infamous for the misuse of users’ data, while also staying vulnerable to frauds and scams. Additionally, decentralized insurance applications can fill the loopholes of DeFi, such as hacking events and lack of verification layers. Also, the power of dApps in decentralized exchanges and smart contracts will always play vital parts in the upcoming years.
The overall scenario of decentralized finance is full of potential. With the support it received in 2020, DeFi has tremendous opportunities to advance further. Its future projects seem to benefit a possible growth this year and various elements like DOAs, NFTs, and more improvements in scalability also look promising in 2021. To wrap it up, there are few aspects of DeFi that can enable it to challenge the current centralized financial systems and dominate.Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.